In focus: Net-zero future initiatives gathering momentum amid restrictions imposed by raging pandemic

Building a sustainable future in a pandemic-ridden world is no easy feat as it brings out many challenges to the fore, however, the energy and maritime industries have shown a great determination to overcome such obstacles in their quest to accelerate decarbonisation and establish a more balanced, lower-carbon energy mix, paving the way towards the net-zero future.

In pursuit of these net-zero ambitions, several new developments were announced in the offshore energy sector this week, which included carbon capture and storage (CCS), clean fuels such as hydrogen and ammonia, and floating offshore wind as low-carbon technologies spurring the energy transition for the oil and gas sector.

The research into the development of new hydrogen technologies to reduce carbon emissions came into focus this week with the signing of a $50.9 million loan agreement, which Haldor Topsøe intends to use for the production of renewable fuels such as green hydrogen, green ammonia, biofuels, and electrified methanol.

Another hydrogen-related development featured Horisont Energi and E.ON as the main players, who decided to embark on a mission to jointly develop end-to-end carbon capture, transport and storage service offering, carbon removal business, clean hydrogen and ammonia production and value chains.

Under the terms of the agreement, E.ON is expected to take responsibility for the carbon capture and liquefaction, leaving Horisont Energi to handle the transport and sequestration of the CO2. 

Nowadays, the belief that mitigating greenhouse gases (GHG) is the way ahead to avert catastrophes arising from climate change is widespread, thus, emission reduction technologies are necessary to achieve decarbonisation in emission-intensive industries and reach long-term net-zero targets.

To this end, industry players are putting their efforts into adopting technologies and energy-efficient processes in line with reduced emissions protocols, establishing CCS as the potential game-changer and one of the most important technological solutions to reduce emissions and help stakeholders to achieve carbon neutrality globally.

Therefore, one of the most common trends this week was the evaluation for the deployment of carbon capture technologies and Samik Mukherjee, McDermott’s Executive Vice President and Chief Operating Officer, described carbon capture as “fundamental to achieving a net-zero future while maintaining affordable, accessible energy and decarbonising resources.”

In its statement from Wednesday, the company announced a deal with Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) to advance carbon capture solutions in response to rising decarbonisation calls, aimed at accelerating the energy transition and bringing the industry closer to net-zero targets.

McDermott started 2022 with a bang due to a major engineering, procurement, construction, and installation (EPCI) contract with QatarEnergy for the offshore scope of the North Field Expansion Project in Qatar. McDermott described this deal as one of the largest single contracts the firm has been awarded in its history.

Samik Mukherjee, McDermott’s Executive Vice President and Chief Operating Officer, said: “As part of the NFE LNG complex, the offshore facilities are an essential contributor toward the energy transition goals of COP-26. In line with McDermott’s overarching sustainability commitments, we will continue to use our digital carbon footprint tool, ArborXD, to monitor and proactively manage GHG emissions during the project.”

The structures will be fabricated in a facility with low-carbon or renewable power as part of McDermott’s previously announced sustainability commitments and emission reduction targets.

Another collaboration aiming to unlock, explore, and assess CCS opportunities was announced by Shell and Petronas this week. The two parties plan to pursue CCS potential in Malaysia and the region surrounding it, in a quest to lower emissions, fulfil net-zero goals, and transform the country into a regional CCS solutions hub.

In line with the firm’s objectives to build a resilient and sustainable portfolio to support the transition towards lower-carbon energy sources, Adif Zulkifli, Petronas Executive VP and CEO of Upstream, believes “this latest collaboration will inspire more innovation towards managing carbon emissions and advancing our shared ambition of delivering energy solutions in a responsible and sustainable manner.”

While embracing the energy transition seems to be the best way forward to achieve climate change goals, the progress is impacted by several factors, including national decarbonisation targets, geopolitics, financing issues, corporate net-zero targets, effects of emission targets on oil and gas investments, low-carbon technology – a crucial asset for oil and gas players – and pricing volatility in the supply chain, according to Westwood.

This energy intelligence provider believes the 2021 United Nations Climate Change Conference (COP26) will be remembered for the pressure it put on national leaders to avoid ending the summit in Glasgow with vague promises and watered-down targets.

Based on Westwood’s assessment and research, the national decarbonisation targets will only get more ambitious over time as new contributions towards net-zero get aired. The research is supported by the trends observed throughout the year behind us, such as those related to methane emissions, which emerged as a soft target last year and are likely to receive further focus this year. Westwood further states that coal’s days are numbered, after which attention is likely to move to the decarbonisation and future role of gas.

However, it is worth paying closer attention to geopolitics, as Westwood’s analysis clearly shows they continue to threaten and impede the energy transition progress due to partisan interests and the pursuit of local, national and regional agendas. This is portrayed rather well by the way President Biden’s Build Back Better Act was torpedoed by a member of his own party. Although, the ongoing tensions between China and the US also demonstrate the tremendous impact of geopolitics and do not bode well for industries such as renewable energy, which are highly dependent on Chinese goods, based on Westwood’s statement.

The situation is not much better in Europe either, as Russia’s sabre-rattling over Ukraine may not result in outright conflict, but Westwood predicts it could easily lead to European sanctions, which would affect energy markets. In fact, the Nord Stream 2 gas pipeline has already been singled out as a strategic asset amid escalating tensions.

The latest analysis further predicts that fossil fuel funding will shrink as the government money going into fossil fuels is potentially drying up. This is further demonstrated by China, which pledged to stop funding foreign coal projects in September last year and the White House, which ordered the U.S. agencies in December to curb overseas engagements in fossil fuel schemes. Even though the real impact of such pledges and orders may be hard to gauge, they will undoubtedly make it harder to finance oil and gas projects in the future.

Meanwhile, if coronavirus variants such as Omicron cause new lockdowns, global supply chain problems could last two more years, affecting all infrastructure projects and hampering the progress of renewable ones with major impact being placed on wind and solar plants.

Should this happen, oil and gas players pushing or planning to push into wind or solar in 2022 may find the price of entry is higher than expected, and the timeframes for projects are longer, while a drag on renewables buildouts could somewhat prolong demand for fossil fuels, although, in Westwood’s view, this effect is likely to be minimal in the grand scheme of things.

Furthermore, Westwood forecasts that energy transition financing from nations will grow, as climate-related donor finance is on an upward trend. The financing for renewable projects and clean fuel initiatives appears to be on the rise this week.

This upward trend is confirmed by California’s Governor Gavin Newsom, who unveiled a state budget proposal for the 2022-2023 fiscal year on 10 January, raising the amount dedicated for offshore wind activities from $20 million to $45 million.

The government intends to advance the development of offshore wind energy in federal waters off the state’s coast, aided by the creation of an Offshore Wind Energy Deployment Facility Improvement Program.

The Clean Energy Investment Plan with a $2 billion budget is designed to encourage additional innovation and deployment of clean energy technologies while providing resources to accelerate decarbonisation. This is part of a wider allocation of funds for climate resilience that will see $20 billion invested over five years to advance the state’s climate and opportunity agenda.

In a bid to decrease California’s reliance on fossil fuels while preparing its economy and workforce for a clean energy future, the new budget includes $50 million for a pilot support fund to address the needs of oil and gas workers facing displacement.

Additionally, the new state budget also allocates $100 million to advance the use and production of green hydrogen, which is seen to be critical to the decarbonisation of California’s economy and achieving carbon neutrality, based on the budget document, which also earmarks $210 million to accelerate industrial sector decarbonisation.

Another significant win for the offshore wind sector came on 12 January, when the U.S. Department of the Interior confirmed that the Bureau of Ocean Energy Management (BOEM) will hold an offshore wind auction for the New York Bight next month, which could lead to up to 7 GW of offshore wind energy capacity being brought to the country’s energy mix.

Liz Burdock, president and CEO of the Network, welcomed the news and added: “With its potential to supply large-scale and dependable clean energy, the responsible development of offshore wind is still our best strategy to quickly decarbonise our economy and mitigate the effects of climate change.”

Meanwhile, over the past year, we have witnessed many ‘net-zero by 2050’ pledges, however, Westwood anticipates that companies will face mounting pressure this year to provide intermediate targets for 2025 or 2030 to sort out greenwashers from real transitioners with greater scrutiny being placed on carbon offsets and other emissions trading tools.

Amid growing calls for emissions reduction, the climate checkpoint concept currently under consultation will further raise the importance of the oil and gas sector meeting the UK’s climate objective to reduce emissions to net-zero by 2050.

The shipping industry has been positioning itself at the centre stage of decarbonisation efforts for some time and is poised to lead clean fuel initiatives. This is further acerbated by projects such as oil sands or sour gas, where growing costs for reducing emissions could significantly dent the viability of these projects, according to Westwood, while massive LNG projects such as the Browse processing plant in Western Australia, are expected to be abandoned for fear of creating stranded assets.

Therefore, the shipping industry is attempting to get greener with the help of clean fuels to not only reach its net-zero targets but also to push these milestones ahead of its originally announced timelines. In line with this, the Danish giant A.P. Moller – Maersk set a new net-zero target earlier this week, aiming to achieve net-zero GHG emissions one decade ahead of its initial 2050 ambition.

The company is now targeting all direct and indirect emissions across the entire Maersk business and not just those related to the ocean fleet, as the firm believes it is “a strategic imperative for Maersk to extend our net-zero ambition to the total footprint of the business.”

In pursuit of its net-zero goals, Maersk ordered a fleet of eight large ocean-going container vessels last year, which can be operated on carbon-neutral methanol. The company followed up on this order by declaring options with Hyundai Heavy Industries (HHI) earlier this week for an additional four 16,000 TEU methanol-powered containerships.

While Maersk expects to welcome the world’s first containership fueled by methanol in 2023, its recent pledge to net-zero by 2040 is likely to prompt the firm to expand its fleet with zero-emission ships in the near future.

Maersk is not the only company that has been working towards achieving its net-zero goals over the past week. In a quest to map out decarbonisation pathways for the company’s fleet of 60 LNG carriers and four very large LPG gas carriers, a Qatari shipping operator, Nakilat, formed a partnership with the American Bureau of Shipping (ABS) to develop a decarbonisation strategy.

Abdullah Al Sulaiti, Nakilat’s CEO, explained: “Our focus is on sustainable development of Nakilat’s fleet beyond 2030, which contributes towards the realization of Qatar National Vision 2030 and our own vision to be a global leader and provider of choice for energy transportation and maritime services.”

Danish Shipping is also doing its part to contribute to the global decarbonization of the shipping industry with a new strategy – aptly named “Towards Zero” – seeking to accelerate the global green transition of the sector by 2050 at the latest.

This means that it intends to put more effort into overcoming the regulatory financial and political barriers that stand in the way of global, climate-neutral shipping. The trade organisation will use the new strategy to exploit Danish shipping companies’ potential in offshore wind and CCS.

Jacob Meldgaard, CEO of TORM and Chairman of Danish Shipping, pointed out: “Denmark is a huge maritime nation and we, therefore, have an obligation to use our size to play a positive and ambitious role in the green transition of global shipping. The new strategy ‘Towards Zero’ therefore aims to accelerate the transition of shipping to becoming emission-free. Together with the government, we can show the way – not only in Denmark but globally.”

In the hopes of launching net-zero emission ocean-going vessels during the current decade and achieving net-zero greenhouse gas (GHG) emissions by 2050, the Japanese shipping major Mitsui O.S.K. Lines (MOL) and ITOCHU Corporation acquired approval in principle from ABS for an ammonia bunkering vessel. Recently, ammonia has been in the spotlight as a promising next-generation clean energy source that produces no carbon dioxide (CO2) during combustion.

Another attempt to lower emissions in the shipping sector came from Germany’s Oldendorff Carriers, who used a renewable energy blend and completed a biofuel trial from Australia to Vietnam. The Edwine Oldendorff vessel was bunkered with an advanced biofuel blend, which is expected to result in a 15 per cent emissions reduction compared to conventional fossil fuels.

Jason Craig, Chief Marketing and Trading Officer of CBH, stated: “Biofuel is one low-carbon option that could be part of the solution to reducing emissions in the shipping industry.” 

As we have noted previously, reducing emissions is not an easy task and it requires a lot of investments and efforts, however, the Dutch shipbuilder Damen Shipyards Group made this process a little easier for itself by taking over the world’s first maritime-certified, multipurpose battery container – the Skoonbox – which contains 314 lithium batteries, good for 638 kWh of renewable energy.

This 20-foot container will be used to deliver renewable power at Damen yards for applications where diesel generators or ships’ engines are primarily used at present and it can potentially also be deployed for customers worldwide.

Vincent de Maat, Damen Shipyards Group, confirmed this by stating: “This is a sustainable replacement for diesel generators but it can also be used as a green form of shore power, allowing ships berthed at our repair yards to turn off their onboard engines. That saves a lot of emissions.”

The week which is now behind us also brought a confirmation of a significant milestone achieved by SAAM Towage. According to the classification society Bureau Veritas, the towage operator correctly measured and offset 100 per cent of the GHG emissions – totalling 3,930 tons of CO2e – generated during 2020 in all maritime operations of the tugs in the Bay of Cartagena.

Reduction in emissions with the help of biofuels is also on the horizon for the dredging sector, which is now looking into accelerating the energy transition by making vessels more sustainable with the use of renewable and clean fuels. Van Oord published a white paper earlier this week about accelerating the energy transition using these methods.

Pieter van Oord, Chief Executive Officer, Van Oord, confirmed: “We are working with Shell to test biofuel in the fleet. Biofuels are solutions that can be implemented in the short and medium-term. You can blend them with conventional fuels without having to make major engine modifications. Vessel carbon emissions are 40 per cent lower with biofuel than with conventional fuel.”

The company revealed it remains committed to the future emissions strategy of the International Maritime Organisation (IMO) and to its goal to be carbon neutral by 2050.

“There is not one, overarching solution to the problem of vessel fuel emissions, but we are doing everything we can to make our fleet more sustainable. For example, we are having three new hopper dredgers built that can operate on LNG, and that will yield a substantial reduction in carbon emissions,” concluded van Oord.

Another option to help speed up global decarbonisation efforts, reduce emissions and reach climate change goals in this race towards a net-zero future would be to unlock the power in waves, according to  Eco Wave Power and Ocean Power Technologies, who joined forces to use their complementary technologies and skills to accelerate wave energy projects.

Inna Braverman, founder and CEO of Eco Wave Power, confirmed that the main objective of this collaboration is “to create positive impact by adding wave energy to the global renewable energy mix to address climate change.”